State HFAs helping stabilize communities, driving loan volumes
State housing finance agencies (HFAs) support their low- to moderate-income homebuyers through affordable housing and community development programs.
During the housing downturn, many homeowners experienced plunging home values. State HFAs responded with programs to help struggling homeowners and add stability to hard-hit communities.
Through Thick and Thin
Fannie Mae has a long-standing commitment to state and local HFAs. We have worked with them for more than 20 years — through thick and thin. In 2011, as the country rebounded from the financial crisis, we saw increases in purchase money mortgages from a small number of state HFAs.
That volume increased when we offered an updated product exclusively to HFAs. We designed HFA Preferred to help eligible HFAs serve first-time and low- to moderate-income borrowers. HFA Preferred features a loan-to-value ratio of up to 97 percent. It has no first-time homebuyer requirement. And it provides other flexibilities for purchasing an owner-occupied principal residence.
We introduced the HFA Preferred product in 2012. Since then, we have seen significant year-over-year increases in originations and purchase volume from a growing number of state and local HFAs. Additionally, HFA Preferred has gained more market acceptance and penetration. And Fannie Mae has continued to enhance the program to offer additional income flexibilities that reflect changing borrower demographics and household formations. Our Desktop underwriting capabilities further enable these flexibilities.
Today, Fannie Mae is working with more than 40 state and local HFAs with annual loan volume in the billions.
Hardest Hit Fund
Since 2010, HFAs have administered Hardest Hit Fund money from the Treasury Department. States are participants either because they are struggling with high unemployment rates or have seen home prices decline more than 20 percent since the housing market downturn.
In the beginning, state HFA programs focused on homeowners in some type of mortgage distress. “Now we’ve developed programs for other issues our residents continue to face,” says Cecka Rose Green, communications director at Florida Housing Finance Corporation.
Florida, California, Oregon, and Michigan have made HHF available to seniors who can’t pay property charges (taxes and insurance) on their home equity conversion (reverse) mortgages. Illinois is using HHF to help underwater homeowners refinance to more affordable loans. And several states have launched HHF down-payment assistance (DPA) programs. Renters often cite down payments as one of their biggest roadblocks to homeownership.
In Florida, homebuyers in specific counties can receive up to $15,000 in down-payment and closing-cost assistance from this program, says Green. Florida has received more than $1 billion of the more than $7.6 billion HHF has allocated to 18 states and the District of Columbia.
“Most of the program’s borrowers are the hardest hit who wouldn’t be able to have access to homeownership without it,” says Patty Steele, a sales manager with Caliber Home Loans, a participating lender in the Florida DPA program.
Steele educates real estate agents about Florida’s HFA DPA program. “Buyers are really surprised that we can combine a couple homeownership programs — such as a program sponsored by the city of Tampa and a mortgage credit certificate,” she says. Steele estimates that she closed 133 HFA loans last year. Two-thirds involved the HHF.
HFAs in both Florida and Arizona use US Bank as their master servicer. The bank aggregates loans from their lender networks and sells them to Fannie Mae. US Bank and Fannie Mae partner to support lender training and marketing and outreach efforts in both states. The full suite of Fannie Mae’s online tools and technology — from HFA Preferred and Desktop Underwriter® to Collateral Underwriter® — make this process simpler and more efficient for all parties.
Steele says her underwriters contact Fannie Mae any time they have questions on selling guidelines. She finds that direct support “extremely helpful.”
Even with the housing market improving, uncertainty remains. We feel the role of state HFAs and their partnership with Fannie Mae to support affordable housing are more important than ever.
We’ll continue to innovate and support HFAs in providing affordable housing opportunities in their markets. We’ve come a long way together, but there are still many renters, homebuyers, seniors with reverse mortgages, and underwater homeowners who need help from these agencies.